Condos didn’t work. The hotel plan checked out. But now a low-profile Wayzata developer has a new plan for a pair of high-profile vintage Minneapolis buildings where past redevelopment plans have fizzled.

Nolan considers apartments for site on Central Avenue

The buildings at 700 and 708 Central Ave. N.E. have been standing empty after redevelopment plans have failed. (Staff photo: Bill Klotz)

Condos didn’t work. The hotel plan checked out. But now a low-profile Wayzata developer has a new plan for a pair of high-profile vintage Minneapolis buildings where past redevelopment plans have fizzled.

Wayzata-based Nolan Properties Group bought the bank-owned buildings at 700 and 708 Central Ave. N.E. in Minneapolis last month. John Nolan, principal with the Nolan Properties Group, confirmed the deal on Thursday.

“We purchased the building. We’re looking to do multifamily. We’re quite aware and keeping a close eye on the tremendous amount of new supply,” Nolan said, referring to the feverish level of apartment projects that have been proposed locally.

“We’re cautiously optimistic about moving forward, but given the tremendous amount of supply that we’re seeing, we certainly want to proceed carefully,” Nolan added. “It’s a great property in a great neighborhood, and that obviously is what caught our attention.”

But Nolan stressed that he is in the preliminary stages of putting a plan together. He has yet to receive financing and has had only informal talks with the city of Minneapolis and the Marcy-Holmes Neighborhood Association.

Nolan said he is envisioning “plus or minus 80” market-rate apartments. The project does not have a name yet.

“We’re not even at the starting line, so to speak,” Nolan said.

On May 10, 7th Central LLC paid $1.59 million for the property, buying it from Minneapolis-based Northeast Bank, according to property records. The bank took back the property last year, according to Hennepin County records.

Back in the go-go days of condo development, the property sold for $4.1 million in November 2005 to the Minneapolis-based 700 Central Development LLC. But the touted project, the Archive, is one of many condo proposals that never got off the ground as the condo market tanked. A later plan for a hotel at the site never moved forward, either.

Before being sold for a potential condo conversion, the property was being used for storage.

With apartment vacancy tightening and continued uncertainty about the home ownership market, apartment development is robust. Minneapolis-based Marquette Advisors reported local apartment vacancy at 3.1 percent at the end of March, down from 6.1 percent at the end of March 2010. The company tracks market-rate apartment occupancy and development.

Brent Wittenberg, vice president of Marquette Advisors, is forecasting that about 2,000 market-rate apartments will be completed in the Twin Cities this year and in 2012. He is projecting 870 new apartments this year and 1,200 to 1,300 new apartments in 2012.

He said that based on current proposals, as many as 2,500 to 2,700 new apartments could be added in 2013. Beyond that, Wittenberg is tracking another 3,500 proposed rental units.

But Wittenberg noted that many developers have yet to secure financing for projects. He said he is comfortable with his projections through the end of 2012, but after that, it becomes much tougher to make predictions. As projects are built, market dynamics and demand will shift.

“Beyond that, there’s too many variables,” Wittenberg said.

Nolan says he is studying the apartment market carefully and remains wary of the potential for overbuilding.

“It’s certainly a great market right at this point. But how deep that market goes, we’re not sure,” he said. He added that if every project that was announced got built, “I think you’d have some issues.”

Nolan acknowledged that he does not have financing for his potential project: “We haven’t started those conversations.”

But Nolan is hoping that he has an advantage in doing a rehabilitation of an existing property rather than proposing new construction, which would take longer to complete.

“We’d like to move through the approval process in the coming months and start construction sometime in the fall. The earlier the better,” Nolan said. “We like the neighborhood an awful lot. We think it’s a great neighborhood and the building itself, it’s definitely a high visibility address.”

Other properties are in play near Nolan’s site. About a block away, Minneapolis-based Hillcrest Development has a contract to buy a site that was once home to Totino’s Italian Kitchen at 519 Central Ave. N.E. and another parcel.

Scott Tankenoff, managing partner with Hillcrest, said he does not yet have a plan for the property. Hillcrest is known as a commercial developer, not a residential developer.

“We’re still in due diligence,” Tankenoff said. “It’s a good neighborhood: It’s a neighborhood that has a lot of good, strong components.”

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Doesn’t look like much of a catch yet but that could all change quite abruptly. Housing in the right neighborhood could be what draws in the family’s as well as a competitive price. Moving forward carefully as Nolan appears to be seems wise with the negative past these buildings have.